January 21, 2016 / 5:07 PM / 2 years ago

Aetna's deal for Humana will push up costs for seniors: think tank

Mark Bertolini, Chairman and CEO of Aetna, participates in a panel discussion at the 2015 Fortune Global Forum in San Francisco, California November 3, 2015.Elijah Nouvelage

WASHINGTON (Reuters) - Aetna Inc's (AET.N) plan to buy smaller insurer Humana Inc (HUM.N) for $31 billion will mean seniors will pay higher Medicare Advantage premiums, according to a new report by the think tank Center for American Progress (CAP).

Aetna's proposed deal for Humana would combine Aetna's 7 percent of the Medicare Advantage market with Humana's 19 percent, and make it the largest provider, according to CAP, which was founded by John Podesta who worked in the White House under Presidents Bill Clinton and Barack Obama.

Medicare Advantage is an insurance plan for seniors that is largely paid for by the government but administered by private insurers.

The deal is one of two giant insurance mergers announced in July. The other was Anthem's (ANTM.N) $45 billion bid for Cigna Corp (CI.N). Deal values were calculated based on Wednesday's closing stock prices.

CAP said in one analysis it found that in counties where Aetna competed with Humana, Aetna's average annual premiums were $302 lower. Using a more conservative approach, it determined that Aetna's average annual premiums were $155 less if it competed against Humana, while Humana's premiums were $43 less if it competed against Aetna, CAP said.

Aetna said that seniors who are hit with price increases with Medicare Advantage could always switch to traditional Medicare, and that two-thirds of seniors are on traditional Medicare. "This keeps downward pressure on prices and upward pressure on quality," said Aetna spokeswoman Kristine Grow in an email.

She also said that Aetna and Humana combined have 4.4 million Medicare Advantage enrollees, about 8 percent of the 54 million people enrolled in Medicare.

"There will continue to be significant competition in Medicare Advantage, with many health plans and other new industry entrants," she said in the email.

Despite the predicted price increase, CAP stopped short of asking the U.S. Justice Department outright to sue to stop the proposed deal.

"All of the available evidence suggests that the bar should be very high for approving these mergers and that they should be stopped absent clear and compelling evidence that they will benefit consumers," the think tank said in its report.

Additional reporting by Caroline Humer; Editing by Jeffrey Benkoe

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